CFA Practice Question

There are 361 practice questions for this study session.

CFA Practice Question

You have a friend who works as a legal adviser to a firm which is about to be acquired at a significant premium to the current market price. He informs you of the upcoming acquisition and suggests that you purchase a significant number of shares. He says that while he is an insider, you can trade on the information because you are not.
A. You cannot trade on the information because it is material and non-public.
B. You can trade on the information because you are not an insider.
C. You cannot trade on the information because your friend has breached fiduciary duty.

User Contributed Comments 6

User Comment
wollogo What exactly does 'fiduciary duty' mean?
ggekko the friend works "as a legal advisor" and therefore has a fiduciary duty to his client
letg why should I care about C? fiduciary duty is friend's problem!
pierreE14 I understand letg's view,
the point is that you cannot trade on misappropried information
ThePessimist I agree C is kind of stupid - it wouldn't make any difference if your friend was the building garbageman (with no fiduciary duty) who saw the draft press release in the trash.
Lamkerst fiduciary duty is to do the best deal for your clients
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